On June 28 2017, government and statutory corporations signed performance agreements for the 2017/18 financial year. Government was represented by Secretary to the Treasury while statutory corporations were represented by chairpersons of the boards.
The agreements contain the obligations of each of the two parties. The obligations of the statutory corporations include activities that the corporations will carry out in the year; the minimum revenues that they will generate; the expenditure ceilings; profit and liquidity levels; and the dividends that they will pay to government, among others.
The obligation of government is broadly to provide the corporations with the requisite support, including granting the conditions that will enable them achieve their targets. I find this beautiful.
The concept of government and statutory corporations signing performance agreements started about three years ago with advent of the Peter Mutharika administration.
However, there was a slight weakness. The draft performance agreements would be sent by government to statutory corporations, but some would not sign them, let alone return them.
Statutory corporations, therefore, found freedom to go business as usual. This time round, however, a great improvement has been made.
All the 61 commercial statutory corporations were called and put in one room at Sunbird Capital for the signing ceremony.
For a long time, there have been concerns regarding the performance of statutory corporations. Even the commercial ones have been criticised for being a drain on the public purse.
Many statutory corporations have been persistent loss-makers, and have also found themselves under the clutches of impossible debt. Instead of them paying a return to the shareholder, the shareholder has had to provide them with a financial bail-out.
With the signing of the performance agreements, it is duly expected that commercial statutory corporations will take matters more seriously, bearing in mind that they are not only being watched, but will also have to be accountable to government at the end of the year in line with the signed agreement.
The literature on the subject tells us that commercial statutory corporations can be a good source of revenue to the national treasury (Luke et al. 2011; Capobianco and Christiansen, 2011). For three years, government has run without direct donor support, a clear sign that the country has great potential to achieve economic independence.
God endowed us with a beautiful country. We can make a lot of money through tourism.
We also know that Malawi has mineral deposits. Thus, tourism and mining, among others, can help widen our revenue base. I know that government has plans and is working on these new sectors.
And to the cause of revenue growth, commercial statutory corporations can make a great contribution through dividends or other cash payouts. It is only fair, therefore, to commend government for putting in place a machinery to ensure that commercial statutory corporations pay up, while they also deliver on their mandate.
And I have been struck by the efficiency. In years past, sometimes budget approvals would be received four months into the new financial year. This year, however, approval was received before the beginning of the new financial year.
It is amazing that within April to June 2017, government officials got statutory corporations to submit their performance management plans and budgets; discussed the same with them; approved them; and developed and signed performance agreements with the corporations based on the management plans and budgets.
The public sector in Malawi is living in an era of reform, championed by government. At the heart of the reforms is efficiency. Government, through its efficiency in the budgeting process for 2017/18, has demonstrated that living by example is better than precept.